Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-707
KANSAS CITY POWER & LIGHT COMPANY
(Exact name of registrant as specified in its charter)
Missouri 44-0308720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 Walnut, Kansas City, Missouri 64106-2124
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 556-2200
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes (X) No ( )
The number of shares outstanding of the registrant's Common stock at
May 4, 1998, was 61,872,915 shares.
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
March 31 December 31
1998 1997
(thousands)
ASSETS
UTILITY PLANT, at original cost
Electric $3,517,951 $3,502,796
Less-accumulated depreciation 1,340,860 1,314,154
Net utility plant in service 2,177,091 2,188,642
Construction work in progress 99,741 93,264
Nuclear fuel, net of amortization of
$91,240 and $86,516 37,107 41,649
Total 2,313,939 2,323,555
REGULATORY ASSET - RECOVERABLE TAXES 123,000 123,000
INVESTMENTS AND NONUTILITY PROPERTY 366,821 345,126
CURRENT ASSETS
Cash and cash equivalents 19,566 74,098
Electric customer accounts receivable, net of
allowance for doubtful accounts
of $1,454 and $1,941 20,722 28,741
Other receivables 31,673 33,492
Fuel inventories, at average cost 16,001 13,824
Materials and supplies, at average cost 45,856 46,579
Deferred income taxes 1,658 648
Other 7,166 7,155
Total 142,642 204,537
DEFERRED CHARGES
Regulatory assets 28,751 30,017
Other deferred charges 31,099 31,798
Total 59,850 61,815
Total $3,006,252 $3,058,033
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (see statements) $2,049,307 $2,051,489
CURRENT LIABILITIES
Notes payable to banks 1,495 1,243
Commercial paper 2,000 0
Current maturities of long-term debt 23,168 74,180
Accounts payable 40,305 57,568
Accrued taxes 13,626 1,672
Accrued interest 20,663 22,360
Accrued payroll and vacations 24,021 23,409
Accrued refueling outage costs 4,259 1,664
Other 17,926 15,068
Total 147,463 197,164
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 640,671 638,679
Deferred investment tax credits 62,128 63,257
Other 106,683 107,444
Total 809,482 809,380
COMMITMENTS AND CONTINGENCIES
Total $3,006,252 $3,058,033
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
1
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
March 31 December 31
1998 1997
(thousands)
COMMON STOCK EQUITY
Common stock-150,000,000 shares authorized
without par value-61,908,726 shares issued,
stated value $449,697 $449,697
Retained earnings (see statements) 416,678 428,452
Unrealized gain on securities available for sale 4,122 1,935
Capital stock premium and expense (1,664) (1,664)
Total 868,833 878,420
CUMULATIVE PREFERRED STOCK
$100 Par Value
3.80% - 100,000 shares issued 10,000 10,000
4.50% - 100,000 shares issued 10,000 10,000
4.20% - 70,000 shares issued 7,000 7,000
4.35% - 120,000 shares issued 12,000 12,000
No Par Value
4.375%* - 500,000 shares issued 50,000 50,000
$100 Par Value - Redeemable
4.00% 62 62
Total 89,062 89,062
COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY KCPL
SUBORDINATED DEBENTURES 150,000 150,000
LONG-TERM DEBT (excluding current maturities)
General Mortgage Bonds
Medium-Term Notes due 1998-2008, 6.92% and
6.92% weighted-average rate 407,500 407,500
3.98%* Environmental Improvement Revenue
Refunding Bonds due 2012-23 158,768 158,768
Guaranty of Pollution Control Bonds
3.94%* due 2015-17 196,500 196,500
Subsidiary Obligations
Affordable Housing Notes due 2000-06, 8.34%
and 8.48% weighted-average rate 68,612 61,207
Bank Credit Agreement due 1999, 6.51% and
6.67% weighted-average rate 107,500 107,500
Other Long-Term Notes 2,532 2,532
Total 941,412 934,007
Total $2,049,307 $2,051,489
* Variable rate securities, weighted-average rate as of March 31, 1998
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
2
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31 1998 1997
(thousands)
ELECTRIC OPERATING REVENUES $195,635 $194,744
OPERATING EXPENSES
Operation
Fuel 35,697 34,922
Purchased power 8,231 11,246
Other 47,003 43,923
Maintenance 15,738 16,816
Depreciation 28,631 27,842
Income taxes 8,237 8,530
General taxes 22,168 22,692
Deferred Wolf Creek costs amortization 0 684
Total 165,705 166,655
OPERATING INCOME 29,930 28,089
OTHER INCOME AND (DEDUCTIONS)
Allowance for equity funds
used during construction 933 260
Miscellaneous income 13,223 3,893
Miscellaneous deductions (20,900) (62,161)
Income taxes 9,747 30,233
Total 3,003 (27,775)
INCOME BEFORE INTEREST CHARGES 32,933 314
INTEREST CHARGES
Long-term debt 14,939 14,516
Short-term debt 91 839
Miscellaneous 4,190 875
Allowance for borrowed funds
used during construction (653) (784)
Total 18,567 15,446
Net Income (Loss) 14,366 (15,132)
Preferred Stock
Dividend Requirements 990 955
Earnings (Loss) Available for
Common Stock $13,376 ($16,087)
Average Number of Common
Shares Outstanding 61,873 61,896
Basic and Diluted earnings (loss)
per Common Share $0.22 ($0.26)
Cash Dividends per
Common Share $0.405 $0.405
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
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KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Twelve Months Ended March 31 1998 1997
(thousands)
ELECTRIC OPERATING REVENUES $896,834 $892,039
OPERATING EXPENSES
Operation
Fuel 135,284 144,654
Purchased power 56,232 49,716
Other 194,977 181,143
Maintenance 69,814 70,282
Depreciation 111,687 107,038
Income taxes 70,820 63,272
General taxes 92,773 95,579
Deferred Wolf Creek costs amortization 684 9,397
Total 732,271 721,081
OPERATING INCOME 164,563 170,958
OTHER INCOME AND (DEDUCTIONS)
Allowance for equity funds
used during construction 3,080 1,968
Miscellaneous income 48,351 7,995
Miscellaneous deductions (77,181) (113,548)
Income taxes 42,548 60,414
Total 16,798 (43,171)
INCOME BEFORE INTEREST CHARGES 181,361 127,787
INTEREST CHARGES
Long-term debt 60,721 55,031
Short-term debt 634 1,972
Miscellaneous 16,158 4,609
Allowance for borrowed funds
used during construction (2,210) (2,341)
Total 75,303 59,271
Net Income (Loss) 106,058 68,516
Preferred Stock
Dividend Requirements 3,824 3,788
Earnings (Loss) Available for
Common Stock $102,234 $64,728
Average Number of Common
Shares Outstanding 61,889 61,900
Basic and Diluted earnings (loss)
per Common Share $1.65 $1.05
Cash Dividends per
Common Share $1.62 $1.605
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
4
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year to Date March 31 1998 1997
(thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 14,366 $ (15,132)
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 28,631 27,842
Amortization of:
Nuclear fuel 4,724 5,115
Deferred Wolf Creek costs 0 684
Other 2,272 1,362
Deferred income taxes (net) (258) (2,885)
Investment tax credit
amortization and reversals (1,129) (1,056)
Deferred merger costs 0 (4,787)
Kansas rate refund accrual 3,165 0
Allowance for equity funds used
during construction (933) (260)
Other operating activities (Note 2) 5,327 (799)
Net cash from operating activities 56,165 10,084
CASH FLOWS FROM INVESTING ACTIVITIES
Utility capital expenditures (22,487) (27,402)
Allowance for borrowed funds used
during construction (653) (784)
Purchases of investments (19,230) (77,241)
Purchases of nonutility property (2,794) (1,611)
Other investing activities 2,884 (4,397)
Net cash from investing activities (42,280) (111,435)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt 7,404 32,000
Repayment of long-term debt (51,011) (6,500)
Net change in short-term borrowings 2,252 102,361
Dividends paid (26,140) (26,028)
Other financing activities (922) 1,059
Net cash from financing activities (68,417) 102,892
NET CHANGE IN CASH AND CASH
EQUIVALENTS (54,532) 1,541
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 74,098 23,571
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $19,566 $25,112
CASH PAID DURING THE PERIOD FOR:
Interest (net of amount capitalized) $20,380 $17,019
Income taxes $0 $0
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
5
KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve Months Ended March 31 1998 1997
(thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 106,058 $ 68,516
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 111,687 107,038
Amortization of:
Nuclear fuel 16,445 20,012
Deferred Wolf Creek costs 684 9,397
Other 9,133 5,460
Deferred income taxes (net) 7,407 (17,278)
Investment tax credit
amortization and reversals (3,923) (4,195)
Deferred storm costs 0 (8,885)
Deferred merger costs 4,787 596
Kansas rate refund accrual 3,165 0
Allowance for equity funds used
during construction (3,080) (1,968)
Other operating activities (Note 2) 2,202 (23,825)
Net cash from operating activities 254,565 154,868
CASH FLOWS FROM INVESTING ACTIVITIES
Utility capital expenditures (119,819) (98,800)
Allowance for borrowed funds used
during construction (2,210) (2,341)
Purchases of investments (49,592) (95,014)
Purchases of nonutility property (16,916) (22,006)
Sale of streetlights 21,500 0
Other investing activities (1,621) (3,524)
Net cash from investing activities (168,658) (221,685)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of mandatorily redeemable
Preferred Securities 150,000 0
Issuance of long-term debt 41,696 155,614
Repayment of long-term debt (73,343) (80,730)
Net change in short-term borrowings (98,866) 92,361
Dividends paid (104,154) (103,119)
Other financing activities (6,786) (946)
Net cash from financing activities (91,453) 63,180
NET CHANGE IN CASH AND CASH
EQUIVALENTS (5,546) (3,637)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 25,112 28,749
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $19,566 $25,112
CASH PAID DURING THE PERIOD FOR:
Interest (net of amount capitalized) $74,633 $60,514
Income taxes $22,385 $53,272
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
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KANSAS CITY POWER & LIGHT COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended Twelve Months Ended
March 31 March 31
1998 1997 1998 1997
(thousands)
Net income (loss) $ 14,366 $ (15,132) $ 106,058 $ 68,516
Other comprehensive income (loss),
net of tax: (Note 3)
Net unrealized gain (loss) on
securities available for sale 2,187 (4,803) 2,441 1,681
Comprehensive Income (Loss) 16,553 (19,935) 108,499 70,197
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Three Months Ended Twelve Months Ended
March 31 March 31
1998 1997 1998 1997
(thousands)
Beginning Balance $ 428,452 $ 455,934 $ 414,774 $ 449,377
Net Income (Loss) 14,366 (15,132) 106,058 68,516
442,818 440,802 520,832 517,893
Dividends Declared
Preferred stock - at required rates 1,081 960 3,894 3,772
Common stock 25,059 25,068 100,260 99,347
Ending Balance $416,678 $414,774 $416,678 $414,774
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
7
KANSAS CITY POWER & LIGHT COMPANY
Certain Forward-looking Information
Statements made in this report which are not based on historical
facts are forward-looking and, accordingly, involve risks and
uncertainties that could cause actual results to differ materially
from those discussed. Any forward-looking statements are intended to
be as of the date on which such a statement is made. In connection
with the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, we are providing the following important factors
that could cause actual results to differ materially from provided
forward-looking information. These important factors include: (a) the
Western Resources Inc. (Western Resources) merger (see Note 1 to the
Consolidated Financial Statements); (b) future economic conditions in
the regional, national and international markets; (c) state, federal
and foreign regulation and possible additional reductions in regulated
electric rates; (d) weather conditions; (e) financial market
conditions, including, but not limited to changes in interest rates;
(f) inflation rates; (g) increased competition, including, but not
limited to, the deregulation of the United States electric utility
industry, and the entry of new competitors; (h) ability to carry out
marketing and sales plans; (i ) ability to achieve generation planning
goals and the occurrence of unplanned generation outages; (j) nuclear
operations; (k) ability to enter new markets successfully and
capitalize on growth opportunities in nonregulated businesses, and (l)
adverse changes in applicable laws, regulations or rules governing
environmental, tax or accounting matters. This list of factors may
not be all inclusive since it is not possible for us to predict all
possible factors.
Notes to Consolidated Financial Statements
In management's opinion, the consolidated interim financial
statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the results of
operations for the interim periods presented. These statements and
notes should be read in connection with the financial statements and
related notes included in our 1997 annual report on Form 10-K.
1. AMENDED AND RESTATED PLAN OF MERGER WITH WESTERN RESOURCES
Western Resources, Inc. (Western Resources) delivered an
unsolicited exchange offer and an amended offer to KCPL's Board of
Directors during the second quarter of 1996. After careful
consideration, KCPL's Board of Directors rejected both offers. In
July 1996 Western Resources commenced an exchange offer for KCPL
Common Stock. In late 1996 KCPL began discussing a possible merger
with Western Resources leading to a February 7, 1997, agreement.
In December 1997 KCPL canceled its previously scheduled special
meeting of shareholders to vote on the transaction because Western
Resources advised KCPL that its investment bankers, Salomon Smith
Barney, had indicated that it was unlikely that Salomon would be in a
position to issue a fairness opinion for the merger transaction on the
basis of the February 7, 1997, agreement. During 1997 KCPL incurred
and deferred $7 million of merger-related costs which were expensed in
December 1997.
On March 18, 1998, KCPL and Western Resources entered into an
Amended and Restated Agreement and Plan of Merger (Amended Agreement).
This Amended Agreement provides for the combination of the regulated
electric utilities of KCPL and Western Resources into Westar Energy, a
new company, using purchase accounting. Westar Energy will be owned
approximately 80.1% by Western Resources and approximately 19.9% by
KCPL shareholders. At closing, KCPL shareholders will receive for
every share of KCPL Common Stock one share of Westar Energy Common
Stock and a fraction of a share of Western Resources Common Stock
valued at $23.50 if
8
the Western Resources Index Price (aggregate of
the average high and low sales prices of Western Resources Common
Stock over a 20-day trading period ending the tenth trading day prior
to closing) is not greater than $47.00 or less than $38.28. If
Western Resources Index Price is above $47.00 or below $38.28, the
value of the Western Resources Common Stock to be issued to KCPL
shareholders in the merger is subject to a collar and will increase
or decrease, respectively. The value per share of Westar Energy
Common Stock to be issued to KCPL shareholders in connection with the
contemplated transactions is estimated to be in the range of $10 to
$12 per share based on current market conditions. Since Westar Energy
will be a newly formed entity with no trading history, there can be no
assurance that Westar Energy will trade at such levels.
The transaction is subject to several closing conditions,
including approval by each company's shareholders, approval by a
number of regulatory and governmental agencies, confirmation from
Kansas tax authorities that no sales or use tax is payable in
connection with the proposed transactions and dissenting KCPL common
shares constitute less than 5.5% of outstanding shares. If shareholder
approval is not received by both companies by August 31, 1998, either
party may terminate the Amended Agreement. If the merger has not been
closed by December 31, 1999, either party may terminate the Amended
Agreement as long as they did not contribute to the delay. If Western
Resources Index Price is less than or equal to $29.78 five trading
days prior to closing, either party can terminate this Amended
Agreement.
The Amended Agreement allows the KCPL Board discretion to make
changes (including increases) in the KCPL Common Stock dividend
consistent with past practice exercising good business judgment. It
also requires KCPL to redeem all outstanding shares of cumulative
preferred stock prior to consummation of the proposed transactions. If
the Amended Agreement is terminated under certain other circumstances
and KCPL, within two and one-half years following termination, agrees
to consummate a business combination with a third party that made a
proposal to combine prior to termination, a payment of $50 million
will be due Western Resources. Under certain circumstances, if KCPL
determines not to consummate its merger into Westar Energy due to its
inability to receive a favorable tax opinion from its legal counsel,
it must pay Western Resources $5 million. Western Resources will pay
KCPL $5 million to $35 million if the Amended Agreement is terminated
and all closing conditions are satisfied other than conditions
relating to Western Resources receiving a favorable tax opinion from
its legal counsel, favorable statutory approvals or an exemption from
the Public Utility Holding Company Act of 1935.
2. CONSOLIDATED STATEMENTS OF CASH FLOWS - OTHER OPERATING ACTIVITIES
Three Months Twelve Months
Ended Ended
1998 1997 1998 1997
Cash flows affected by changes (thousands)
in:
Receivables $9,838 $25,895 $(15,084) $9,547
Fuel inventories (2,177) 1,360 1,716 (697)
Materials and supplies 723 37 1,441 (1,625)
Accounts payable (17,263)(18,873) 3,560 (15,296)
Accrued taxes 11,954 (7,356) 2,539 (30,182)
Accrued interest (1,697) (1,191) 800 (1,928)
Wolf Creek refueling outage
accrual 2,595 2,099 (5,021) 8,723
Pension and postretirement
benefit obligations (1,549) (532) (3,262) (97)
Other 2,903 (2,238) 15,513 7,730
Total $5,327 $ (799) $2,202 $(23,825)
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3. ACCOUNTING CHANGES
Change in Accounting Estimate
In 1998 KCPL adopted the American Institute of Certified Public
Accountants Statement of Position (SOP) 98-1 -- Accounting for the
Costs of Computer Software Developed or Obtained For Internal Use.
KCPL was generally in conformance with this SOP prior to adoption in
regards to external direct costs and interest costs incurred in the
development of computer software for internal use. This SOP also
provides that once the capitalization criteria of the SOP have been
met, payroll and payroll-related costs for employees who are directly
associated with and who devote time to the internal-use computer
software project should be capitalized.
Costs capitalized in accordance with SOP 98-1 will be amortized
on a straight-line basis over estimated service lives of 5 to 10
years. The effect of adopting SOP 98-1 for the three-months ended
March 31, 1998, is an increase of net income of approximately $600,000
($0.01 per share).
Comprehensive Income (Loss)
In 1998 KCPL adopted Financial Accounting Standards Board
Statement No. 130 -- Reporting Comprehensive Income which establishes
standards for reporting of comprehensive income and its components.
4. SECURITIES AVAILABLE FOR SALE
Certain investments in equity securities are accounted for as
securities available for sale and adjusted to market value with
unrealized gains (or losses), net of deferred income taxes, reported
as a separate component of comprehensive income and common stock
equity.
KLT Inc. (KLT), a wholly-owned subsidiary of KCPL, has a $5
million investment in CellNet Data Systems, Inc. This investment is
held as securities available for sale. Unrealized gains applicable to
this investment of $4.1 million, net of $2.3 million deferred income
taxes, at March 31, 1998, increased from $1.9 million, net of $1.1
million deferred income taxes, at December 31, 1997.
5. CAPITALIZATION
KCPL is authorized to issue up to $300 million in unsecured
medium-term notes under an indenture dated December 1, 1996. As of
March 31, 1998, no unsecured medium-term notes had been issued.
KCPL Financing I (Trust), a wholly-owned subsidiary of Kansas
City Power & Light Company, has previously issued $150,000,000 of 8.3%
preferred securities. The sole asset of the Trust is the $154,640,000
principal amount of 8.3% Junior Subordinated Deferrable Interest
Debentures, due 2037, issued by KCPL.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
STATUS OF MERGER
See Note 1 to the Consolidated Financial Statements as to the
current status of the merger agreement with Western Resources Inc.
(Western Resources) including the Amended and Restated Agreement and
Plan of Merger (Amended Merger Agreement) dated March 18, 1998. In
December 1996 the Federal Energy Regulatory Commission (FERC) issued a
statement concerning electric utility mergers. Under the statement,
companies must demonstrate that their merger does not adversely affect
competition or wholesale rates. As remedies, FERC may consider a
range of conditions including transmission upgrades, divestitures of
generating assets or formation of independent system operators.
REGULATION AND COMPETITION
As competition develops throughout the electric utility industry,
we are positioning Kansas City Power & Light Company (KCPL) to excel
in an open market. We are improving the efficiency of KCPL's core
utility operations, lowering prices and offering new services. In
particular, value-added services for large energy users can include
contracts for natural gas commodities.
Competition in the electric utility industry was accelerated with
the National Energy Policy Act of 1992. This Act gives FERC the
authority to require electric utilities to provide transmission line
access to independent power producers (IPPs) and other utilities
(wholesale wheeling). KCPL, already active in the wholesale wheeling
market, was one of the first utilities to receive FERC's approval of
an open-access tariff for wholesale wheeling transactions. In April
1996 FERC issued an order requiring all owners of transmission
facilities to adopt open-access tariffs and participate in wholesale
wheeling. We have made the necessary filings to comply with that
order.
FERC's April 1996 order has encouraged more movement toward
retail competition at the state level. An increasing number of states
have already adopted open access requirements for utilities' retail
electric service, allowing competing suppliers access to their retail
customers (retail wheeling). Many other states are actively
considering retail wheeling. In Kansas, the retail wheeling task
force has proposed a restructuring bill that would implement retail
competition on July 1, 2001. Some of the key points included in the
proposed bill are: 1) the Kansas Corporation Commission (KCC) will
determine the amount of under-utilized assets (stranded costs) each
utility is allowed to recover and 2) a unit charge per kwh will be
assessed to all customers for recovery of competitive transition costs
(these costs include stranded costs, other regulatory assets, nuclear
decommissioning, etc.). No retail wheeling bill has been passed in
the Kansas legislature in 1998. In Missouri, a legislative committee
has been formed to study the issue. The retail wheeling task force
formed by the Missouri Public Service Commission (MPSC) issued its
report in May 1998. The report identifies issues and various options
for the legislature to address.
Competition through retail wheeling could result in market-based
rates below current cost-based rates. This would provide growth
opportunities for low-cost producers and risks for higher-cost
producers, especially those with large industrial customers. Lower
rates and the loss of major customers could result in stranded costs
and place an unfair burden on the remaining customer base or
shareholders. Testimony filed in the merger case in Kansas for KCPL
indicated that stranded costs are approximately $1 billion. An
independent study prepared at the request of the KCC concluded that
there are no stranded costs. We cannot predict the extent that
stranded costs
11
will be recoverable in future rates. If an adequate
and fair provision for recovery of these lost revenues is not
provided, certain generating assets may have to be evaluated for
impairment and appropriate charges recorded against earnings. In
addition to lower profit margins, market-based rates could also
require generating assets to be depreciated over shorter useful lives,
increasing operating expenses.
Although Missouri and Kansas have not yet authorized retail
wheeling, we believe KCPL is positioned well to compete in an open
market with its diverse customer mix and pricing strategies. About
21% of KCPL's retail mwh sales are to industrial customers which is
below the utility industry average. KCPL has a flexible rate
structure with industrial rates that are competitively priced with
other companies in the region. In addition, long-term contracts are
in place or under negotiation for a large portion of KCPL's industrial
sales. Although there currently is no direct competition for retail
electric service within KCPL's service territory, it does exist within
the bulk power market, between alternative fuel suppliers and among
third-party energy management companies. Third-party energy
management companies are seeking to initiate relationships with large
users in an attempt to enhance their chances to directly supply
electricity if retail wheeling is authorized.
Increased competition could also force utilities to change
accounting methods. Financial Accounting Standards Board (FASB)
Statement No. 71 - Accounting for Certain Types of Regulation, applies
to regulated entities whose rates are designed to recover the costs of
providing service. An entity's operations could stop meeting the
requirements of FASB 71 for various reasons, including a change in
regulation or a change in the competitive environment for a company's
regulated services. For those operations no longer meeting the
requirements of regulatory accounting, regulatory assets would be
written off. KCPL's regulatory assets, totaling $152 million at March
31, 1998, will be maintained as long as FASB 71 requirements are met.
It is possible that competition could eventually have a
materially adverse affect on KCPL's results of operations and
financial position. Should competition eventually result in a
significant charge to equity, capital costs and requirements could
increase significantly.
NONREGULATED OPPORTUNITIES
KLT Inc. (KLT) is a wholly-owned subsidiary pursuing nonregulated
business ventures. Existing ventures include investments in domestic
and international nonregulated power production, energy services, oil
and gas development and production, telecommunications, telemetry
technology and affordable housing limited partnerships.
KCPL had a total equity investment in KLT of $119 million as of
March 31, 1998, and KLT's net income for the three-month period ended
March 31, 1998, totaled $4.1 million. KLT's consolidated assets at
March 31, 1998, totaled $351 million. The growth of KLT accounts for
most of the increase in KCPL's consolidated investments and nonutility
property.
RESULTS OF OPERATIONS
Three-month three months ended March 31, 1998, compared
period: with three months ended March 31, 1997
Twelve-month twelve months ended March 31, 1998, compared
period: with twelve months ended March 31, 1997
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EARNINGS OVERVIEW
Earnings Per Share (EPS)
For the Periods Ended March 31
Increase(decrease)
Merger excluding
1998 1997 Increase Expenses Merger Expenses
Three months $0.22 $(0.26) $0.48 $0.43 $ 0.05
ended
Twelve months $1.65 $ 1.05 $0.60 $0.67 $(0.07)
ended
EPS for the three-month period excluding merger expenses
increased primarily due to increased subsidiary income $0.04, reduced
cost of fuel $0.02, increased bulk power sales and continued load
growth. Partially offsetting these increases were the effects on EPS
of implementing rate reductions approved by the KCC effective January
1, 1998, ($0.03), increased interest expense related to the
mandatorily redeemable preferred securities ($0.03) and milder
weather.
EPS for the twelve-month period excluding merger expenses
decreased due to the implementation of rate reductions approved by the
KCC ($0.03), the effect of the rate reductions approved by the MPSC
($0.06), increased interest expense related to the mandatorily
redeemable preferred securities ($0.12) and increased depreciation
expense ($0.05). Partially offsetting these decreases are the effects
on EPS of an increase in subsidiary income $0.14, a decrease in
amortization expense $0.09 and continued load growth.
Merger expenses for the three-months ended March 31, 1998, were
$5.3 million ($0.09 per share). During the three-months ended March
31, 1997, KCPL paid $53 million ($0.52 per share) to UtiliCorp United
Inc. (UtiliCorp) for terminating the merger agreement with UtiliCorp
and announcing an agreement to combine with Western Resources. Merger
expenses for the twelve-months ended March 31, 1998, reduced EPS by
$0.16. For the twelve-months ended March 31, 1997, merger expenses
reduced EPS by $0.83 which includes $0.52 for the UtiliCorp payment
and $0.31 for other merger expenses.
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MEGAWATT-HOUR (MWH) SALES AND OPERATING REVENUES
Sales and revenue data:
For the Periods Ended
March 31, 1998 versus March 31, 1997
------------------------------------
Three Months Twelve Months
--------------- ----------------
Mwh Revenues Mwh Revenues
---- --------- --- ----------
(revenue change in millions)
Retail:
Residential 1 % $ 1 5 % $ 13
Commercial 3 % 2 5 % 10
Industrial 1 % - (3)% (1)
Other - % (2) 2 % (5)
Kansas rate
refund accrual (3) (3)
--------- ----------
Total Retail 2 % (2) 3 % 14
Sales for resale:
Bulk power sales 13 % 3 (22)% (12)
Other 8 % - 14 % 1
--------- ----------
Total 1 3
Other revenues - 2
--------- ----------
Total electric
Operating Revenues $ 1 $ 5
--------- ----------
--------- ----------
The KCC approved a settlement agreement, effective January, 1,
1998, authorizing a $14.2 million revenue reduction and an increase in
depreciation expense of $2.8 million. When the KCC approves a new
rate design, which is anticipated near year-end 1998, KCPL will refund
the portion of the $14.2 million that has accrued between January 1,
1998 and the implementation date of the new rate design. Recorded
revenues for the three- and twelve-month periods are reduced by about
$3 million as a result of an accrual for this rate refund.
During 1996 the MPSC approved a stipulation and agreement
authorizing a $20 million revenue reduction in two phases and an
increase in depreciation and amortization expense by $9 million per
year. The decrease in revenues for the twelve-month period as a
result of this stipulation and agreement was about $6 million.
These rate reductions, combined with seasonally lower retail
sales in March 1998 versus December 1997, resulted in a lower accounts
receivable balance at March 31, 1998, compared with December 31, 1997.
Even though weather was milder for the three-month period, retail
mwh sales increased due to load growth. Load growth consists of
higher usage-per-customer as well as the addition of new customers.
Retail mwh sales for the current twelve-month period increased 3%
while retail revenues increased 2%. The MPSC and KCC rate reductions
discussed above decreased revenues for the twelve-month period while
retail mwh sales increased due to continued load growth.
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KCPL has long-term sales contracts with certain major industrial
customers. These contracts are tailored to meet customers' needs in
exchange for their long-term commitment to purchase energy. Long-term
contracts are in place or under negotiation for a large portion of
KCPL's industrial sales.
Bulk power sales vary with system requirements, generating unit
and purchased power availability, fuel costs and the requirements of
other electric systems. Outages at the LaCygne 1 and 2 generating
units in the second quarter of 1997 and the extended 1997 Wolf Creek
outage contributed to lower bulk power mwh sales in the current twelve-
month period.
Total revenue per mwh sold varies with changes in rate tariffs,
the mix of mwh sales among customer classifications and the effect of
declining price per mwh as usage increases. An automatic fuel
adjustment provision is only included in sales for resale tariffs,
which apply to less than 1% of revenues.
Future mwh sales and revenues per mwh will also be affected by
national and local economies, weather and customer conservation
efforts. Competition, including alternative sources of energy such as
natural gas, co-generation, IPPs and other electric utilities, may
also affect future sales and revenue.
FUEL AND PURCHASED POWER
Combined fuel and purchased power expenses for the three-month
period decreased by 5% while total mwh sales (total of retail and
sales for resale) increased by 5%. This difference is largely
attributable to increased generation from LaCygne II, a low-cost, coal-
fired generating unit that was not available during February and March
1997 because of a planned outage. Purchased power decreased primarily
because of this additional generation. The cost per kwh for purchased
power is significantly higher than the cost per kwh of generation.
Combined fuel and purchased power expenses for the twelve-month
period decreased 1% while total mwh sales decreased 3%. This
difference is largely due to increased purchased power expenses and a
higher percentage of coal burned in the fuel mix.
Nuclear fuel costs per MMBTU remain substantially less than the
MMBTU price of coal. Nuclear fuel costs per MMBTU decreased 2% for
the twelve-month period. Nuclear fuel costs per MMBTU averaged 61% of
the MMBTU price of coal for the current and prior twelve-month
periods. We expect the current relationship and the price of nuclear
fuel to remain fairly constant through the year 2001. During the
current twelve-month period fossil plants represented about 75% of
generation and the nuclear plant about 25%. For the prior twelve-
month period, fossil plants represented about 72% of generation and
the nuclear plant about 28%.
The price of coal burned declined by 2% for the twelve-month
period. KCPL's coal procurement strategies continue to provide coal
costs below the regional average. We expect the cost of coal per
MMBTU to remain fairly constant through 2001.
OTHER OPERATION AND MAINTENANCE EXPENSES
Combined other operation and maintenance expenses for the three-
and twelve-month periods increased due largely to increases in other
power supply expenses and annual employee salary increases. The
twelve-month period also reflects increases in customer accounts
expenses and Wolf Creek non-fuel operations.
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We continue to emphasize new technologies, improved work
methodology and cost control. We are improving system processes to
provide increased efficiencies and improved operations. Through the
use of cellular technology, a majority of customer meters are read
automatically.
DEPRECIATION AND AMORTIZATION
The increase in depreciation expense for the three- and twelve-
month periods reflects the implementation of the KCC settlement
agreement, the continued impact of the MPSC stipulation and agreement
and normal increases in depreciation from capital additions. The KCC
settlement agreement authorized an annual increase in depreciation
expense of $2.8 million. The MPSC stipulation and agreement
authorized a $9 million annual increase in depreciation expense.
INCOME TAXES
Operating income taxes for the twelve-month period increased by
approximately $8 million as the prior twelve-month period reflected
adjustments for the filing of the 1995 tax returns and the settlement
with the Internal Revenue Service regarding tax issues included in the
1985 through 1990 tax returns.
OTHER INCOME AND (DEDUCTIONS)
Miscellaneous Income
Miscellaneous income for the three- and twelve-month periods
includes increased revenues from non-utility and subsidiary
operations. Dividends on the investment in a fossil-fuel
generator in Argentina, revenues from a subsidiary in which KLT
obtained a controlling interest during 1997 and increased
revenues from oil and gas exploration contributed to the increase
in miscellaneous income from subsidiary operations.
Miscellaneous Deductions
Miscellaneous deductions for the three- and twelve-month periods
decreased primarily due to the $53 million payment to UtiliCorp
in the prior periods. During the three-months ended March 31,
1998, $5 million of merger expenses were incurred related to the
Amended Merger Agreement with Western Resources. In addition,
the twelve-months ended March 31, 1998, includes $7 million of
merger expenses related to the original merger agreement with
Western Resources. In addition to the $53 million payment to
UtiliCorp, the prior twelve-month period included $31 million in
other merger costs. These costs consist of $13 million in
previously deferred merger costs expensed as a result of
terminating the merger agreement with UtiliCorp, a $5 million
termination fee paid upon termination, and $13 million in costs
to defend against Western Resources' unsolicited exchange offer.
Both periods also reflect increased non-utility expenses and
subsidiary operating costs. Increased gas operations and
inclusion of three small companies in which KLT obtained
controlling interests during 1997 are the primary activities that
contributed to the increased subsidiary expenses.
Income Taxes
Income taxes for the three- and twelve-month periods reflect the
tax impact of the excess of miscellaneous deductions over
miscellaneous income. Additionally, during the first quarter of
both 1998 and 1997 we accrued tax credits of $6 million, or one-
fourth of the total expected annual credits, related to
affordable housing partnership investments and oil and
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gas investments. Non-taxable increases in the cash surrender value
of corporate-owned life insurance contracts and certain non-
deductible expenses also affected the relationship between
miscellaneous deductions and income taxes.
INTEREST CHARGES
The increase in long-term debt interest expense for the three-
and twelve-month periods reflects higher average levels of long-term
debt outstanding. The higher average levels of debt resulted mainly
from increased KLT debt to support expanding subsidiary operations.
The increase in miscellaneous interest charges for the three- and
twelve-month periods is primarily due to interest charges incurred on
the $150 million of 8.3% preferred securities.
We use interest rate swap and cap agreements to limit the
interest expense on a portion of KCPL's variable-rate long-term debt.
We do not use derivative financial instruments for trading or other
speculative purposes. These agreements are an integral part of KCPL's
interest rate management. The effect of these agreements on interest
expense and cash flows is not significant.
WOLF CREEK
Wolf Creek is one of KCPL's principal generating units
representing about 16% of its accredited generating capacity. The
plant's operating performance has remained strong, contributing about
27% of the annual mwh generation while operating at an average
capacity of 88% over the last three years. It has the lowest fuel
cost per MMBTU of any of KCPL's generating units.
The incremental operating, maintenance and replacement power
costs for planned outages are accrued evenly over the unit's operating
cycle, normally 18 months. As actual outage expenses are incurred,
the refueling liability and related deferred tax asset are reduced.
Wolf Creek's ninth refueling and maintenance outage, budgeted for
35 days, began in early October 1997 and was completed in December
1997 (58 days). The extended length of the ninth outage was caused by
several equipment problems. The extended length of the outage was the
primary reason for a $6 million increase in Wolf Creek related
replacement power and operating and maintenance expenses for the
twelve-month period. Wolf Creek's tenth refueling and maintenance
outage is scheduled for the spring of 1999 and is estimated to be a 40
day outage.
Currently, no major equipment replacements are expected. An
extended shut-down of Wolf Creek could have a substantial adverse
effect on KCPL's business, financial condition and results of
operations. Higher replacement power and other costs would be
incurred as a result. Although not expected, an unscheduled plant
shut-down could be caused by actions of the Nuclear Regulatory
Commission reacting to safety concerns at the plant or other similar
nuclear units. If a long-term shut-down occurred, the state
regulatory commissions could consider reducing rates by excluding the
Wolf Creek investment from rate base.
Ownership and operation of a nuclear generating unit exposes KCPL
to risks regarding the cost of decommissioning the unit at the end of
its life and to potential retrospective assessments and property
losses in excess of insurance coverage.
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ENVIRONMENTAL MATTERS
KCPL's policy is to act in an environmentally responsible manner
and use the latest technology available to avoid and treat
contamination. We continually conduct environmental audits designed
to ensure compliance with governmental regulations and detect
contamination. However, these regulations are constantly evolving;
governmental bodies may impose additional or more rigid environmental
regulations that could require substantial changes to operations or
facilities.
The Clean Air Act Amendments of 1990 contain two programs
significantly affecting the utility industry. KCPL has spent about $5
million for the installation of continuous emission monitoring
equipment to satisfy the requirements under the acid rain provision.
The other utility-related program calls for a study of certain air
toxic substances. Based on the outcome of this study, regulation of
these substances, including mercury, could be required. We cannot
predict the likelihood of any such regulations or compliance costs.
In July 1997 the United States Environmental Protection Agency
(EPA) published new air quality standards for ozone and particulate
matter. Additional regulations implementing these new standards are
expected to be finalized in 1998. Without the implementation
regulations, the real impact of the standards on KCPL cannot be
determined. However, the impact on KCPL and other utilities who use
fossil fuels could be substantial. Under the new fine particulate
regulations the EPA will begin a five-year study of fine particulate
emissions. Until this testing and review period has been completed,
KCPL cannot determine additional compliance costs, if any, associated
with the new particulate regulations.
In 1997 the EPA also issued new proposed regulations on reducing
Nitrogen Oxide (NOx) emissions. Under the new regulations 22 states,
including Missouri but not Kansas, would be required to develop plans
to reduce NOx emissions. The new limits would go into effect in
either 2002 or 2004. The cost of equipment to reduce NOx emissions
could be substantial, however, until regulations are finalized the
associated costs to KCPL cannot be determined.
At a December 1997 meeting in Kyoto, Japan, the Clinton
Administration supported changes to the International Global Climate
Change treaty which would require a seven percent reduction in United
States Carbon Dioxide (CO2) emissions below 1990 levels. President
Clinton has stated that this change in the treaty will not be
submitted to the U.S. Senate at this time where ratification is
uncertain. If future national restrictions on electric utility CO2
emissions are eventually required, the financial impact upon KCPL
could be substantial.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs using two
digits instead of four digits to define the applicable year. Computer
programs with date-sensitive software may recognize a date using "00"
as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations.
Through ongoing assessment of the Year 2000 Issue, we have
determined that it is necessary to modify or replace some of KCPL's
internal software so that its computer systems will properly utilize
dates beyond December 31, 1999. We believe that with the planned
modifications and conversions of KCPL's software, the Year 2000 Issue
can be mitigated. We will utilize both internal and external
resources to address the Year 2000 Issue.
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For the past several years, we have been incurring capitalizable
costs to replace older systems with new and innovative technologies
that place us in a stronger competitive position for the future. As a
result, the cost of the Year 2000 project has been lessened. The
costs of modifications and replacements identified in the Year 2000
project are being expensed as incurred and are not material to KCPL's
results of operations. However, there is no guarantee that current
cost estimates of the Year 2000 project will not be exceeded.
Specific factors that might cause costs to exceed estimates include,
but are not limited to, the availability and cost of appropriately
trained personnel, the ability to locate and correct all relevant
computer codes, and similar uncertainties.
We have initiated formal communications with all of KCPL's large
suppliers and customers to evaluate KCPL's vulnerability to those
third parties' failure to remediate their own Year 2000 Issue.
However, there is no guarantee that third party systems on which
KCPL's systems rely will be timely converted, or that a failure to
convert, or a conversion that is incompatible with KCPL's systems,
would not have a material adverse effect on KCPL.
CAPITAL REQUIREMENTS AND LIQUIDITY
As of April 1, 1998, the liquid resources of KCPL included cash
flows from operations; $300 million of registered but unissued,
unsecured medium-term notes; $150 million of registered but unissued,
preferred securities and $314 million of unused bank lines of credit.
The unused lines consisted of KCPL's short-term bank lines of credit
of $271 million and KLT's long-term revolving line of credit of $43
million. Cash and cash equivalents decreased by $55 million from
December 31, 1997 to March 31, 1998, primarily due to redeeming $51
million of maturing long-term debt and paying dividends.
KCPL continues to generate positive cash flows from operating
activities although individual components of working capital items
will vary with normal business cycles and operations including the
timing of receipts and payments. The timing of the Wolf Creek outage
affects the refueling outage accrual, deferred income taxes and
amortization of nuclear fuel.
The increase in accrued taxes from December 31, 1997, to March
31, 1998, mainly reflects the timing of income tax and property tax
payments.
Coal inventory levels at the end of April 1998 continue to be
about 75% of targeted levels, due mainly to poor railroad delivery
performance. Such railroad related problems are expected to continue
at least through the end of 1998. We are continuing to work with
KCPL's rail carriers to ensure an adequate coal supply and allow
recovery to targeted coal inventory levels.
Cash used in investing activities varies with the timing of
utility capital expenditures and KLT's purchases of investments and
nonutility properties. KLT closed several large investments during
the first three months of 1997. Additionally, the current twelve-
month period reflects $21.5 million of proceeds from the sale of
streetlights to the City of Kansas City, Missouri at a minimal gain.
Cash used for financing activities increased for the twelve-month
period primarily due to repayment of long- and short-term debt. In
April 1997, KCPL Financing I, a wholly-owned subsidiary of KCPL,
issued $150 million of preferred securities, which was used in part
for these repayments. Additionally, in the prior twelve-month period
long- and short-term borrowings increased to finance KCPL's $53
million payment to UtiliCorp as well as additional purchases of
investments and nonutility properties by KLT.
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KCPL's common dividend payout ratio was 98% for the current
twelve-month period and 153% for the prior twelve-month period
compared to 80% for the twelve-month period ended March 31, 1996. The
increase in the payout ratios is due mainly to the reduction in
earnings because of the significant merger-related expenses in both
twelve-month periods.
We expect to meet day-to-day operations, utility construction
requirements and dividends with internally-generated funds.
Uncertainties affecting KCPL's ability to meet these requirements with
internally-generated funds include the effect of inflation on
operating expenses, the level of mwh sales, regulatory actions,
compliance with future environmental regulations and the availability
of generating units. The funds needed for the retirement of
$414 million of maturing debt through the year 2002 will be provided
from operations, refinancings or short-term debt. KCPL might issue
additional debt and/or additional equity to finance growth or take
advantage of new opportunities.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
STATE OF MISSOURI EX REL. INTER-CITY BEVERAGE CO., INC., ET. AL
VS. THE PUBLIC SERVICE COMMISSION OF THE STATE OF MISSOURI, ET.
AL; AND JEWISH COMMUNITY CAMPUS OF GREATER KANSAS CITY, INC. VS.
KANSAS STATE CORPORATION COMMISSION, ET. AL.
On August 13, 1993, a lawsuit was filed by nine customers,
including Inter-City Beverage Co., Inc., in the Circuit Court of
Jackson County, Missouri against KCPL. The suit alleged the
misapplication of certain of KCPL's electric rate tariffs
resulting in overcharges to industrial and commercial customers
which had been provided service under those tariffs and requested
certification as a class action. On December 3, 1993, the Court
dismissed the matter for lack of subject matter jurisdiction.
Plaintiffs appealed to the Missouri Court of Appeals, Western
District. The Court of Appeals upheld the dismissal. Plaintiffs
then filed a motion to transfer the case with the Missouri
Supreme Court. The motion was denied.
Plaintiffs then took their claims to the state commissions
filing complaints at the MPSC on August 23, 1995, and at the KCC
on August 30, 1995, on behalf of Jewish Community Campus, the
only Kansas plaintiff. The MPSC complaint was dismissed May 1,
1996. The Cole County, Missouri Circuit Court affirmed the
dismissal on January 29, 1997, and the Missouri Court of Appeals,
Western District, affirmed the dismissal on April 21, 1998.
Appellant has until May 6, 1998, to file an application for
transfer to the Missouri Supreme Court.
The KCC complaint was dismissed April 9, 1996. The Johnson
County, Kansas District Court affirmed the dismissal on February
4, 1997. The Plaintiff filed a Notice of Appeal to the Kansas
Court of Appeals on March 3, 1997. Plaintiff's Initial Brief was
filed with the Court of Appeals on May 27, 1997. The briefs of
KCPL and the KCC were filed on June 30, 1997. Plaintiff's Reply
Brief was filed July 15, 1997.
Should the proceedings before the MPSC and KCC be overturned
by the state courts, KCPL could be required to refund the alleged
overcharges. KCPL believes it will be able to successfully
defend these actions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
Exhibit 12 Computation of Ratios of Earnings to Fixed Charges
Exhibit 27 Financial Data Schedule (for the three months
ended March 31, 1998)
REPORTS ON FORM 8-K
A report on Form 8-K was filed with the Securities and
Exchange Commission on January 6, 1998, with attached copy of a
press release issued jointly by KCPL and Western Resources, Inc.
announcing postponement of their respective January 21, 1998,
special meetings of shareholders.
A report on Form 8-K was filed with the Securities and
Exchange Commission on March 23, 1998, with attached press
release and copy of Amended and Restated Agreement and Plan of
Merger by and among Western Resources, Inc., Kansas Gas and
Electric Company, NKC, Inc., and Kansas City Power & Light
Company, dated as of February 7, 1997, and as amended and
restated March 18, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
KANSAS CITY POWER & LIGHT COMPANY
Dated: May 5, 1998 By: /s/Drue Jennings
(Drue Jennings)
(Chief Executive Officer)
Dated: May 5, 1998 By: /s/Neil Roadman
(Neil Roadman)
(Principal Accounting Officer)